ABB Annual Report 2012 PDF - ABB Group Annual Report 2012

Note 14Leases, continuedNote 15Commitments and contingenciesContingencies – EnvironmentalMinimum lease payments have not been reduced by minimum sublease rentals due in the future under non-cancelablesubleases. Such minimum sublease rentals were not significant. The present value of minimum lease payments ispresented in “Short-term debt and current maturities of long-term debt” or “Long-term debt” in the Consolidated BalanceSheets.The Company is engaged in environmental clean-up activities at certain sites arising under various United States andother environmental protection laws and under certain agreements with third parties. In some cases, these environmentalremediation actions are subject to legal proceedings, investigations or claims, and it is uncertain to what extent theCompany is actually obligated to perform. Provisions for these unresolved matters have been set up if it is probable thatthe Company has incurred a liability and the amount of loss can be reasonably estimated. If a provision has been recognizedfor any of these matters, the Company records an asset when it is probable that it will recover a portion of thecosts expected to be incurred to settle them. Management is of the opinion, based upon information presently available,that the resolution of any such obligation and non-collection of recoverable costs would not have a further materialadverse effect on the Company’s consolidated financial statements.Contingencies related to former Nuclear Technology businessThe Company retained liabilities for certain specific environmental remediation costs at two sites in the United Statesthat were operated by its former subsidiary, ABB CE-Nuclear Power Inc., which the Company sold to British Nuclear FuelsPLC (BNFL) in 2000. Pursuant to the sale agreement with BNFL, the Company has retained the environmental liabilitiesassociated with its Combustion Engineering Inc. subsidiary’s Windsor, Connecticut, facility and agreed to reimburseBNFL for a share of the costs that BNFL incurs for environmental liabilities associated with its former Hematite, Missouri,facility. The primary environmental liabilities associated with these sites relate to the costs of remediating radiologicaland chemical contamination. Such costs are not incurred until a facility is taken out of use and generally are thenincurred over a number of years. Based on information available, the Company believes that radiological remediation atthe Windsor site will be concluded in 2013. In February 2011, the Company and Westinghouse Electric Company LLC(BNFL’s former subsidiary) agreed to settle and release the Company from its continuing environmental obligations underthe sale agreement in respect of the Hematite site. The settlement amount was paid by the Company in February 2011.During 2007, the Company reached an agreement with U.S. government agencies to transfer oversight of the remediationof the portion of the Windsor site under the U.S. Government’s Formerly Utilized Sites Remedial Action Programfrom the U.S. Army Corps of Engineers to the Nuclear Regulatory Commission which has oversight responsibility for theremaining radiological areas of that site and the Company’s radiological license for the site.Contingencies related to other present and former facilities primarily in North AmericaThe Company is involved in the remediation of environmental contamination at present or former facilities, primarily inthe United States. The clean up of these sites involves primarily soil and groundwater contamination. A significantportion of the provisions in respect of these contingencies reflects the provisions of acquired companies. A substantialportion of one of the acquired entities remediation liability is indemnified by a prior owner. Accordingly, an asset equalto that portion of the remediation liability is included in “Other non-current assets”.The impact of the above Nuclear Technology and other environmental obligations on “Income from continuing operations,net of tax” was not significant in 2012, 2011 and 2010. The impact on “Income from discontinued operations, netof tax” was not significant in 2012 and 2011, and was an income of $29 million in 2010.The effect of the above Nuclear Technology and other environmental obligations on the Company’s Consolidated Statementsof Cash Flows was not significant for the year ended December 31, 2012, and amounted to $149 million and$26 million for the years ended December 31, 2011 and 2010, respectively, primarily related to the Nuclear Technologybusiness.The Company’s estimated cash expenditures for 2013 are $18 million and are covered by provisions included in“Provisions and other current liabilities”.The total effect of the above Nuclear Technology and other environmental obligations on the Company’s ConsolidatedBalance Sheets was as follows:December 31, ($ in millions) 2012 2011Provision balance relating to:Nuclear Technology business 9 24Various businesses 82 6891 92Environmental provisions included in:Provisions and other current liabilities 22 22Other non-current liabilities 69 7091 92Provisions for the above estimated losses have not been discounted as the timing of payments cannot be reasonablyestimated.110 Financial review | ABB Annual Report 2012